Demand worries hurt oil, stocks fall on trade uncertainty

NEW YORK (Reuters) – Oil futures sank on Wednesday amid higher U.S. crude inventories and a weaker demand outlook, while uncertainty over the U.S.-China trade war and its potential economic impact weighed on stock markets.

The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, June 6, 2019. REUTERS/Staff

The dollar index was barely higher after May data showed moderate inflation as U.S. consumer prices barely rose. That, with a slowing economy, could build a case for the Federal Reserve to cut interest rates.

“I don’t think this signals an inflation slump or anything. But, it’s still going to fuel expectations of ease,” said Michael Cloherty, head of U.S. rates strategy at RBC Capital Markets.

While stock market participants also eyed the latest data as a potential support for a rate cut, that was not enough to outweigh worries about the economic impact of escalating trade tensions.

With under three weeks to go before proposed talks between U.S. President Donald Trump and Chinese President Xi Jinping at the June 28-29 G20 summit in Osaka, expectations for progress toward ending the trade war were low here and sources told Reuters that there had been little preparation for a meeting.

“This is a market that would love to see us get back to the negotiating table. The longer these trade tensions last, the most damage it’ll do to the economy, and therefore to earnings,” said Art Hogan, chief market strategist at National Securities in New York.

The Dow Jones Industrial Average fell 35.57 points, or 0.14%, to 26,012.94, the S&P 500 lost 5.12 points, or 0.18%, to 2,880.6 and the Nasdaq Composite dropped 30.56 points, or 0.39%, to 7,792.00.

The pan-European STOXX 600 index lost 0.25% and MSCI’s gauge of stocks across the globe shed 0.25%.

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